COTY outpaces Q2 expectations, will it be enough to break it out?
AInvestWednesday, Feb 7, 2024 10:24 pm ET
2min read
COTY --

Coty Inc., a leading beauty company, reported strong financial results for the second quarter of fiscal year 2024, which ended on December 31, 2023. The company's growth in the prestige and consumer beauty segments, as well as its strong e-commerce sales, demonstrate its ability to expand its market share and attract new customers. Coty's geographic expansion and licensing announcements also indicate the company's commitment to continued growth in the beauty industry.

The company's net revenues for the quarter were $1.73 billion, representing a 13% increase year-over-year, surpassing Wall Street's expectations of $1.68 billion. The company's adjusted earnings per share (EPS) for the quarter were 25 cents, up from 22 cents in the prior year and exceeding analysts' estimates of 20 cents. 

Coty's prestige channel net revenue for the quarter was $1.12 billion, up 17% year-over-year, driven by strong sales of Burberry Goddess, which became the top fragrance launch in multiple markets, and Burberry's Hero and Her. In addition, Coty saw double-digit percentage like-for-like revenue growth in prestige color cosmetics brands Kylie, Burberry, and Gucci, while in skin care, Lancaster continued to perform well. 

The company's consumer beauty net revenue for the quarter was $605 million, up 6.9% year -over-year, just below analysts' expectations of $608 million. 

Coty's gross margin for the quarter was 65.1%, compared to 65.5% in the prior year and below analysts' expectations of 65.5%. The company's adjusted gross margin for the quarter was 65.1%, compared to 65.5% in the prior year. 

Coty's adjusted EBITDA for the quarter was $366.4 million, representing a 15% increase year-over-year and surpassing analysts' expectations of $358.2 million. Coty's growth in the second quarter of fiscal year 2024 was driven by strong demand for fragrances. 

The company's e-commerce sales also grew by over 20% for both Prestige and Consumer Beauty, resulting in e-commerce penetration in the low 20s percentage. Coty gained e-commerce market share in both Prestige and Consumer Beauty, fueled by strong improvements in e-commerce fundamentals and service levels, social media activations, and close collaboration with e-retail partners. 

Coty's geographic expansion also contributed to the company's growth in the quarter. All regions generated double-digit percentage like-for-like revenue growth, with EMEA sales expanding 16% as reported and 10% like-for-like, Americas sales rising 10% as reported and 11% like-for-like, and Asia Pacific sales growing 15% as reported and 16% like-for-like.

Coty's strong Q2 sales momentum fueled significant operating and EBITDA growth and margin expansion. The company's Q2 reported operating income of $236.7 million grew 19% year-over-year, and adjusted operating income of $309.3 million grew 18% year-over-year, resulting in 70 basis points of adjusted operating margin expansion to 17.9%. The company's adjusted EBITDA of $366.4 million grew 15%, with the adjusted EBITDA margin up 40 basis points to 21.1%. Coty's strong financial performance in the second quarter of fiscal year 2024 reflects the company's ability to capitalize on the growing demand for beauty products. 

In conclusion, Coty Inc. reported strong financial results for the second quarter of fiscal year 2024, driven by robust demand for and the company's ability to expand its market share in the prestige and consumer beauty segments. The company's e-commerce growth and geographic expansion also contributed to its success in the quarter. With its commitment to continued growth and innovation in the beauty industry, Coty Inc. remains a strong contender in the competitive beauty market.


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